Airline Business Research
Cancellations and theirRelationship to and Impact onAirline Service Quality
This paper is the first attempt by the authors of the ‘Service Disquality Index’ to relatecancellations to the index, and to model the impact of cancellations on overall airline servicequality. Cancellations as reported in the Air Travel Consumer Report are compared andcorrelated to the SDI. Additionally, the impact of cancellations are added into the SDI andexamined to measure the possible impact of cancellations on redistributing the rankingof airlines in the index. The inclusion of cancellations does not impact the ranking of theairlines using the SDI, but does support the inclusion of cancellations in the SDI goingforward as a truer measure of airline service disquality.
Two major airline service quality measurement systems currentlyexist that use the same source for data as input into their derivedairline service quality measures. Both the Airline Quality Rating(aqr.aero) and Rhoades and Waguespack’s ‘Service DisqualityIndex’ (SDI) use statistics provided by the Department of Transportation (DOT) in the monthly Air Travel Consumer Report as the basis for analysis. However, the Air TravelConsumer Report is not a static report that remains unchanged.
New data elds and statistics are introduced into the report by
the DOT. One new data point introduced in the past few years,cancellations by the major airlines, is the focus of this paper. Todate, neither the Service Disquality Index nor AQR has utilizedthe cancellation data in their analysis.The United States Department of Transportation has publishedinformation since 1987 relating to various aspects of airlineservice quality including on-time performance, overbooking,mishandled baggage, and customer complaints (http://airconsumer.ost.dot.gov/reports). This information, containedin the Air Travel Consumer Report, has served as the basisfor ongoing research by two groups of scholars interested inairline service quality. One group of scholars has published anannual Airline Quality Rating (www.aqr.aero) report since 1991(Bowen and Headley, 2007). The second group of scholars is based at Embry-Riddle Aeronautical University. Using similar data in a somewhat different ranking system, the researchershave reported that service quality for the major US carriers
e-zine edition 40
Dr. Blaise P. Waguespack and Dr. Dawna L. Rhoades
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improved from 1987-1993, then deteriorated from 1994-2001,showed a marked improvement from 2001 to 2003, but has latelydeteriorated again. The improvement since 2001 was mainly
attributable to reductions in ight scheduling and to reduced
passenger load factors, following the September 11
th
terroristattacks. However, passenger levels have climbed back to pre-
9/11–rates, and, with airlines struggling nancially the last fewyears, service factors and ights have been trimmed, causing
service numbers to decline recently (Rhoades and Waguespack,1998, 2000a, 2000b, 2004, 2008 forthcoming).The focus of both airline service quality systems, the SDI andAQR, are on US airlines, because of the availability of data. Thedata exists in a format to allow the development of such service
quality systems, due to the operational and nancial reporting
requirements that US carriers must legally comply with. At thistime, while the Association of European Airlines presents the“AEA Customer Report” on the association’s website (www.aea.be), the data presented does not eactly match the informationavailable from the US Department of Transportation, and onlyallows some basic comparisons in service quality issues betweenUS and EU airlines (see Waguespack, Tiernan and Rhoades,2006). Furthermore, the AEA Consumer Report does notinclude all EU carriers, as major carriers (ex: Virgin Atlantic,Aer Lingus) as well as many of the major low-cost carriers (ex:Ryanair and easyJet) have opted out of reporting operationaldata in the AEA Consumer Report.While the systems developed by both teams of researchers haveremained stable, the data presented in the Air Travel Consumer Report have not. The data tables under some of the subsectionshave been extended over time to include further statistics on
issues such as delays by airport or listings of the ights having
the worse on-time percentage. Additionally, the number of airlines included in the report has changed over time, and ithas not remained steady. With new airlines starting service andgrowing to merit inclusion (i.e. JetBlue), airlines going out of business (i.e. TWA) or mergers (i.e. US Airways and America
West) the number of airlines included in the report has uctuated
over time.Besides the additional reporting on the original factors andchanges in the number of airlines being reported on, new sectionshave been added over the years to the Air Travel Consumer Report. Recently, in July 2005, new sections in the report haveincluded sections on issues related to (1) Customer ServiceReports to the Department of Homeland Security as provided by the Transportation Security Administration and (2) Airlinereports to DOT of incidents involving the loss, injury or deathof animals during air transport. Both of those new sections weremandated by Congressional acts to be included with the report. News reports have picked up on these changes in the Air Travel
Consumer Report, and have presented some of these ndings
in the press, as part of recent issues concerning service qualityissues (McCartney, 2004; Levin & Frank, 2007).
Cancellations and the Air Travel Consumer Report
Cancellations rst appeared in the Air Travel Consumer Report
in the April 2000 report with the inclusion of “Table 8: Overall Number and Percentage of Flight Cancellations by Carrier”that reported the February 2000 cancellations for the ten major airlines included in the report at that time. For the next fewmonths, little would change about the formatting of table 8,with just the major airlines at that time listed, and the number of
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cancellations per month presented. However, ongoing changesin the air transport system would bring a change to the manner in which data was reported.The summer of 2000 and the wide variety of airline serviceissues that arose that year provide an easy and recognizable point for the impetus for the inclusion of data about the causes of cancellations into the Air Travel Consumer Report. Examiningthe data from past SDI research shows that the year 2000 hassome of the highest SDI rates until that time (Rhoades andWaguespack, 2004). The summer of 2000 saw many problems,such as weather and labor strife throughout the air transportationsystem that brought attention to the issue of cancellations, andto their impact on passengers (Gregory 2000). At the same time,as these reports were ongoing in the press, the DOT was activelyresponding to past events, and the DOT Inspector General issuedthe Interim Report on Airline Customer Service Commitment
in July of 2000 with one section that purposely discussed ight
delays and cancellations (US DOT, report AV-2000-102).Concerning cancellations, on page 20 of the Interim Report, theInspector General notes “we found the airlines have made a clear and substantial effort to communicate delays and cancellations, but the information being communicated is frequently inaccurate,incomplete or unreliable.” Additionally, the report goes onto state (page 20) that “some airlines repeatedly blamed their
delay or cancellation entirely on FAA’s air trafc control system
when, in fact, the delay was due to severe weather or an Airlineschedule irregularity (mechanical problems with the aircraft or
ight crew shortages).”
Meanwhile, with these factors at work, and the ongoing statutoryresponsibility to report on air carrier quality of services, theDepartment of Transportation on December 27, 2001 issued inthe Federal Register proposed rules for “Reporting the Causesof Airline Delays and Cancellations (Volume 66, Number 248).”
Reecting the work of the Air Carrier On-Time Reporting
Advisory Committee, the rule proposed criteria for reporting thecause of cancellations. Among the stated goals that this proposalhoped to accomplish were:
“By requiring air carriers to report thecause of delays and cancellations, we hopeto address two important air transportation
issues: (1) identify the causes of ight delays
and cancellations for future corrective actionand (2) alleviate some of the frustration and anger that airline passengers have expressed
concerning delayed and cancelled ights
(page 66835).”
The original notice makes it quite clear that the major airlines atthat time were to start reporting on the causes of cancellationsimmediately. However, it would not be until November 25,2002 when a “Final Rule” statement appeared in the FederalRegister (Volume 67, Number 277) that the date for the
ofcial implementation of the procedure to report the causes of
cancellations was to be effective June 1, 2003. Soon after, the
rst data tables reporting the causes for cancellations appeared
in the December 2003 Air Travel Consumer Report. Starting inthe December 2003 report, “Table 9: Flight Causation Data, byAirline and Category” and “Table 10: Flight Causation Data,Graphical Representation” appeared.
Service Disquality Index - SDI
To compute the SDI, data from the Air Travel Consumer Report(1987-2007) is utilized. The Air Travel Consumer Report,
produced by the US Department of Transportation, was rst
published in 1987, and, as noted above, has undergone a number
of changes over the years. The SDI, as rst derived by the authors
in 1998 (Rhodes, Waguespack and Truedt, 1998), has been usedover the years to measure service quality issues after the eventsof 9/11 (Rhoades and Waguespack, 2004), and to examine other airline industry segments (Rhoades and Waguespack, 2000b).The index score derived in the SDI represents the sum of the
following data: the percentage of late ights, total number of
consumer complaints, total number of involuntary denied boardings, and total number of mishandled baggage reportsdivided by total yearly departures for a particular airline. In a realsense, this rate is a measure of disquality and can be interpretedas the number of quality problems per departure. As noted by oneairline commentator, the data from the report provides differentmeasures of reliability and performance, not overall quality(Perkins, 2007). Using the formulation of the SDI as structured by the researchers, one could postulate that the SDI representsthe likelihood of a service failure based on past performance.
This Study
As noted, while the Air Travel Consumer Report has changed, theSDI has not. With the issue of cancellations now having been inthe report for several years, and as news stories on cancellationscontinue to make national and international news (Higgins,2006; Sloan, 2007), the authors believe that it is now time toinclude this measure in the index. It is not that cancellationswere not addressed in the SDI, but the issue was addressed onlytangentially through the complaint measures. If one examinestable 1, the leading complaint category over the four years of thisstudy is “Flight Problems”and the largest complaint sub-category under this issue has been cancellations, almostdouble the other sub-categoriesreported the last two years.However, compared to the waythe other issues in the SDI areaddressed directly with actualoccurrences represented, thiswas, at best, a very minimalmethod to have cancellationsas a factor in the SDI. For thisstudy, the authors examinethe relationship betweencancellations and the SDI for the years 2003 through 2006.For this study, we begin with presenting the original SDI numbers by year for the US major airlines in the Air Travel Consumer Report in table 2. The SDI rates for all the airlines have obviouslyrisen over the past four years. There were lower load factors aswell as a lower number of departures after the events of 9/11, as
fewer people ew and as airlines trimmed schedules accordingly,and this has lowered the SDI at rst. However, as air trafc has
resumed nearing pre-9/11 levels, the SDI for the major airlinesare climbing once more, as it did before in 1998-2000.The next table, table 3, displays the yearly cancellation rates for the airlines. This number was derived by totaling the number of cancellations for the year and dividing by departures. Whiletrends are harder to discern with these numbers than the SDI,one notable issue is the low number of cancellations for theyears shown for JetBlue during this time, as a stated operational
aspect of the airline at the time was to not cancel ights, if at
all possible. Also noteworthy is Continental’s low rate, whichmay speak well for the airline as Continental was one of thefew legacy carriers during this time that avoided bankruptcy and
reached protability.
To begin the investigation of cancellations and the possible
impact on the SDI, the rst analysis completed is to simply
correlate the original formulation of the SDI with the airlinecancellation rate over the four years studied (correlating the datain table 2 and table 3). No expectation or hypotheses are putforth in the exploratory research. One supposition could be theexpectation of a positive correlation between cancellations and
the SDI, as it may seem that airlines having service difculties
may well have more cancellations. However, if a policy of the
airline is to attempt to y the
schedule as presented and to
not cancel ights, though this
may mean delays and late
ights increase, cancellations
will be minimized, and,therefore, a negativecorrelation may occur.One would need to knowthe policy and operationalstrategy of the individualairline management totherefore make a hypothesisthat would be airline-bound.
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Complaint Category Com #Sub-CatCom #Sub-CatCom #Sub-CatCom #Sub-Cat2003 2004 2005 2006Flight Problems 1,260 1,746 2,234 2,162Cancellations 416 617 901 832Delays 419 442 530 475Misconnections 208 290 383 453Baggage 1,080 1,428 2,035 1,936Res/Tktg/Boarding 880 931 989 1,007Customer Service 695 888 942 1,019Complaint Totals 5,983 7,477 8,741 8,321
Table One – Top Complaint Categories 2003-2006 Air Travel Consumer Report
Airline SDI 03Rank 03SDI 04Rank 04SDI 05Rank 05SDI 06Rank 06Airtran 0.2461 2 0.2260 2 0.3038 1 0.4129 1Alaska 0.1988 1 0.3030 4 0.4650 7 0.5956 6American 0.3858 8 0.4357 9 0.5818 9 0.7364 8America West 0.3372 7 0.4166 8 0.4566 5Continental 0.2873 5 0.2942 3 0.4046 3 0.5469 5Delta 0.4549 11 0.6100 11 0.8167 11 0.9130 9JetBlue 0.4416 10 0.3972 6 0.5356 8 0.5360 4Northwest 0.2842 4 0.3628 5 0.4490 4 0.5040 2Southwest 0.2797 3 0.1491 1 0.3759 2 0.5320 3United 0.3981 9 0.4117 7 0.4617 6 0.6858 7USAirways 0.3096 6 0.4547 10 0.7740 10 1.3565 10
Table Two – Original Service Disquality Index by Airline by Year
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40 Waguespack Cancellations
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